PETALING JAYA: The outlook for the crude oil market for this year is plagued with uncertaintiy arising from US President Donald Trump’s trade policies and escalation of geopolitical risks.
Economists and analysts are projecting the price of the commodity to trade at between US$65 and US$83 per barrel and even as high as US$117 this year.
Economists expected Malaysia to withstand inflationary pressures from crude oil prices although the country has been a net importer of crude oil and petroleum products since 2022.
They believe prices will go up due to the government’s subsidy rationalisation move, and not oil prices.
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid told StarBiz he is maintaining Brent crude oil price projection of US$73 per barrel for 2025.
He said the crude oil industry landscape continues to point to a higher degree of uncertainties, especially on tariff policies by the Trump administration as well as geopolitical development in the Middle East and Ukraine.
“On one hand, the supply of oil is expected to be forthcoming with oil production from the non-Organisation of the Petroleum Exporting Countries (Opec) members, especially the United States is likely to stay elevated.
The United States crude oil production continues to rise to 13.6 million barrels per day (mbpd) on March 7, 2025 and this was largely contributed by the shale oil production,” he noted.
Furthermore, he said the International Energy Agency (IEA) has indicated that crude oil supplies would exceed demand by one mbpd on account of higher production by the non-Opec members as well as the unwinding of production cuts by the Opec+ members.
“It is rather a mixed outlook as the excess supplies of crude oil would mean prices may not escalate while geopolitical risks would intermittently result in crude oil prices to be well supported.
“As such, we are of the view that crude oil prices alone may not be the major source of inflation in Malaysia.
“Rather it is more of the policy change in fuel subsidies as the gap between the actual market price and subsidised fuel prices are wide.
“Therefore, the mechanism for the subsidy rationalisation is critical to determine the inflationary trend post implementation,” Afzanizam said.
MARC Ratings Bhd chief economist Ray Choy
MARC Ratings Bhd chief economist Ray Choy expects crude oil prices to trend lower this year, primarily due to rising supply and softer demand for the commodity.
He is maintaining the oil price projection for the year to be within the range of US$65 to US$75 per barrel against an average of US$80 in 2024.
He said the key drivers of this outlook include increased production from Opec+ as members ease supply restrictions, alongside a policy shift in the United States under President Donald Trump.
“His administration’s pro-production stance is expected to encourage further output, contributing to downward pressure on prices.
“On the demand side, growth is likely to moderate, reflecting tougher global trade conditions stemming from potential protectionist policies under the Trump administration.
“While geopolitical risks or unexpected supply disruptions could introduce volatility, the broader trend for crude oil prices in 2025 remains weaker within our projected range,” Choy noted.
“Overall, given our view of lower oil prices in 2025, we see little risk of oil prices pushing up inflation significantly.
“We forecast Malaysia’s 2025 consumer price index (CPI) to be manageable at 2.6%,” Choy said.
OCBC Asean senior economist Lavanya Venkateswaran.
OCBC Bank senior Asean economist Lavanya Venkateswaran said Malaysia’s inflation is relatively sheltered from global oil prices given the RON95 subsidies.
“Our expectation is for the government to do a one-off price adjustment to RON95 starting in July 2025, by raising the price by 20% to25%.
“Even this mechanism is unlikely to reflect changes in global oil prices.
“However, if the government reverts to the automatic price mechanism for RON95, the translation effect of global oil prices onto inflation could be much clearer,” she said.
Economist Shan Saeed said the oil market outlook for 2025 continues to move between geopolitics and geo-economics with exogenous factors playing a deeper role in the forward price movement and market dynamics.
“We can expect oil shocks in 2025 like what happened in the 1970s as geopolitical risk is becoming unpredictable as the situation in the Red Sea and Gaza is getting precarious.
History can repeat as the market stays nervous.
“For example, the oil market from 1973 to 1974. In October 1973, oil was trading at US$2.90 per barrel.
In January 1974, it was US$11.65 per barrel, and in March 1974 it was at US$13,” he said.
Shan, who is the global chief economist at Juwai IQI, said he was sticking to his oil price projections of between US$83 and US$117 per barrel.
He attributed this, among others, to trade tariffs, trade wars among various countries, higher oil demand from China, Africa and Asean, precarious situation in the red sea, war in Gaza and Yemen and sanctions on Iran.
“The energy market is not settling down very soon and it will remain at a tempestuous level with a lot of uncertainty. Oil shock is possible with various global scenarios affecting the global economy. Backwardation can return to the oil macro equation,” he said.
Backwardation is when the current price, or spot price of oil, is higher than prices trading in the futures market.
As at press time, the international benchmark Brent crude was up by 0.25% to US$72.18 per barrel.
OCBC Asean economist Jonathan Ng
Meanwhile, OCBC Asean economist Jonathan Ng said year-to-date, Brent and West Texas Intermediate (WTI) averaged US$75.3 per barrel, and US$71.9 per barrel respectively.
This is close to the bank’s expectations, which forecast both benchmarks to average at US$74.2 and and US$70.7 in the first quarter (1Q25).
Since then, he said the bank has observed some downside risks to our current forecasts. This is due to firstly, higher Opec+ supply from 2Q25 onwards.
“Secondly, the prospects of a Russia-Ukraine ceasefire will result in the lifting of Western sanctions on Russian oil, thereby paving the way for its return to commercially available storage.
“And lastly, escalating trade tensions. Trade fragmentation is likely to exert downward pressure on macroeconomic growth and, consequently, on the demand for commodities,” he said.
Ng said these factors seem to indicate a potential return of supply to the global oil market, considering downward pressure on global oil demand growth. Consequently, he said this implies a stronger buildup in global oil inventories than OCBC had previously anticipated, thereby posing downward risks to the bank’s forecasts, he noted.
On the other hand, he believes a stronger recovery in China would pose an upside risk to the bank’s forecasts. Additionally, Ng said a potential pause or reversal in planned Opec+ output increases, along with a re-escalation of geopolitical tensions in the Middle East, would support the crude market in terms of higher prices.
As for Malaysia’s fiscal position in relation to crude oil, Afzanizam said the country has been recording trade deficits in crude petroleum and petroleum products for three consecutive years since 2022.
In 2024, he said the trade deficits stood at RM40.9bil on the back of imports totalling RM184.6bil and exports of RM143.7bil. In that sense, he said Malaysia has turned into a net oil importer.
As such, he said there is more reason that the government needs to implement the fuel subsidy rationalisation in order to keep the fiscal balance in check and to ensure only those who are qualified will receive the government assistance.